If total liabilities increased by $45,000 and equity increased by $15,000 during a period of time, then total assets: A. decrease by $30,000. B. increase by $30,000. C. decrease by $60,000. D. increase by $60,000.
Question
If total liabilities increased by 15,000 during a period of time, then total assets:
A. decrease by $30,000.
B. increase by $30,000.
C. decrease by $60,000.
D. increase by $60,000.
Solution
The answer is D. increase by $60,000.
Here's the step-by-step explanation:
The fundamental accounting equation is Assets = Liabilities + Equity.
If liabilities increase by 15,000, then the right side of the equation (Liabilities + Equity) increases by 45,000 + $15,000).
In order for the equation to remain balanced, the left side of the equation (Assets) must also increase by $60,000.
Therefore, total assets increase by $60,000.
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